The region overall experienced higher levels of lockdowns in this quarter due to the rise of the Delta variant.
In China, sales growth was also curtailed in China in July and August due to COVID-19 restrictions. Additionally, online sales growth slowed following the 6.18 shopping festival and in anticipation of 11.11.
During this time, Hainan traffic was also impacted, hitting the travel retail sector. However, once restrictions were lifted, sales picked up “almost immediately,” said Tracey Travis, executive VP and CFO.
Despite this, more than half of brands in almost all channels rose by double-digits and the firm achieved double-digit growth in China overall.
“Mainland China achieved double-digit organic sales growth owing to skin care and fragrance, with online and brick-and-mortar both higher. We launched locally relevant innovation which proved highly desirable, while we also increased advertising spending, strategically expanded our consumer reach to match the success on JD, and designed successful activation for Chinese Valentine's Day,” said Fabrizio Freda, president and CEO, The Estée Lauder Companies.
Furthermore, the firm performed well in Hong Kong and Macau, which benefited from strong new product launches from La Mer and Jo Malone and successful marketing campaigns from several other brands.
The firm also highlighted strong growth in South Korea’s travel retail market.
From a category perspective, fragrance and skin care net sales grew double digits in the region and hair care increased single digit.
Digital investments pay off
The focus on its investments in digital marketing resulted in strong double-digit online sales growth that more than offset the impact to brick-and-mortar from the resurgence of COVID-19 cases during the quarter.
For instance, the company saw success with the launch of La Mer on South East Asian e-commerce platform, Lazada.
“La Mer launched on Lazada in South East Asia to tremendous success with differentiated merchandising, unique services, and prestige packaging, making it one of the platform's biggest brand launches ever,” said Freda.
Moving forward, the company expects to see a rebound in the region in the second quarter.
“We are expecting a pickup in the second quarter. We are not anticipating as many of the restrictions to be in place in the rest of APAC that we saw in Q1,” said Travis.
Overall, the firm reported net sales of $4.39 billion, a rise of 23% for the three months to September 30, 2021.
New China facility in second half
The company said it will continue to invest in China, where it still sees long-term growth.
“We continue to invest in the vibrant and compelling long-term growth opportunity in Mainland China, led by our talented local team. We are enthusiastic for our new innovation centre in Shanghai to open in the second half of this fiscal year.”
He added that this new facility will be “the first of its kind for our company.”
“With it, we will have a unique ability to grow and build on our market and consumer insights to develop exceptional products to meet and surpass the needs and desires of Chinese consumers.”